3M's Sales Drop Despite Demand for Face Masks, Cleaning Supplies -- 4th Update

By Austen Hufford 

3M Co. is the lead maker of the most critical face masks in the fight against Covid-19. But mask demand hasn't protected the company from the brutal economic impact of the pandemic.

The Saint Paul, Minn.-based manufacturer said Tuesday that it suffered a sharp sales drop in its latest quarter while many factories, offices and dentists remained closed, offsetting gains from high demand for N95 masks and home-improvement supplies.

"We saw steep declines," Chief Executive Mike Roman said in an interview. "About 80% of our portfolio was negatively impacted by Covid."

The company's shares fell nearly 5% in recent trading.

3M said the global economy appeared to be recovering. Total sales so far in July were higher than sales through this portion of the month last year, and adjusted sales in China increased 3% in 3M's second quarter, which ended in June.

But 3M's sales adjusted for acquisitions and currency fluctuations fell 12% in the quarter as companies made fewer cars and planes, hospitals performed fewer elective procedures and office managers placed fewer supply orders.

3M has doubled production of its N95 masks this year to meet skyrocketing demand from health-care workers. 3M said it produced nearly 800 million respirators and N95s -- so-called because they block 95% of very small particles -- in the first half of this year globally and has distributed about half of them in the U.S.

The largest domestic maker of N95 masks is growing production even further as it and other producers respond to what they see as a long-term shift toward domestic production of medical products.

Still, face masks make up a small part of 3M's business, which spans from advanced wound-care products to Scotch tape and industrial sandpaper. Adjusted sales fell 19% in its transportation and electronics segment, 12% in health care, 6% in safety and industrial and 5% in its consumer segment. The company had previously said that it expected the second quarter, which went through June, to be the weakest for the global economy.

3M said sales fell 57% in the quarter for products that are sold to dentists, such as teeth cements, and 25% for office supplies like its Post-it Notes.

In addition to masks, sales of home-improvement products also rose for 3M as stuck-at-home consumers fixed up their houses. Paint maker Sherwin-Williams Co. on Tuesday also reported a surge in demand for its do-it-yourself paint products.

Mr. Roman said that demand for 3M's products rose in July, but that the company remains unsure how the rest of the year would play out as the coronavirus continues to spread in the U.S. and around the world.

"What does a recovery look like? It's not likely to be a perfectly smooth line," Mr. Roman said.

3M said it is closely watching plans on how and whether to reopen schools this fall. A number of prominent school districts, including the country's second-largest, Los Angeles, have said they would start the school year online. 3M, which sells many popular school supplies, said it has been increasing inventory and that retailers it works with are largely planning for reopenings.

Adjusted sales fell 13% in the U.S., 23% in Canada and 38% in Mexico. In all, total revenue declined 12% to $7.18 billion in the quarter. The company posted a net profit of $1.29 billion, or $2.22 a share, up from $1.13 billion, or $1.92 a share a year earlier. On an adjusted basis, earnings per share fell to $1.78 from $1.92.

Write to Austen Hufford at [e-mail]

(END) Dow Jones Newswires

July 28, 2020 15:45 ET (19:45 GMT)

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